Buy KEC International; target of Rs 375: Prabhudas Lilladher

November 13
18:24 2019

Prabhudas Lilladher’s research report on KEC International

KEC International (KEC) reported PAT of Rs1.4 bn (up 42% YoY) which was higher than our estimate (PLe Rs1.2 bn) on account of strong operating performance and lower tax rate. T&D & railway segments were the key revenue growth drivers during the quarter while others reported negative growth. While order inflow during the quarter was muted at Rs8.5 bn due to elections and deferment of few large tenders. The YTD order inflow stood at Rs38 bn. KEC is L1 in order worth Rs50 bn and order backlog stands at Rs180 bn which gives strong revenue visibility. The management is confident on execution momentum and maintained its revenue growth guidance of 15-20%, EBITDA margin of 10.5% (flat). However, meeting 20% order inflow guidance could be challenging due to ongoing weak environment situations. In the domestic market, management is positive on opportunities coming from Green Energy Corridor, States, Railways, Civil sector etc. In International markets, tender pipeline looks strong from Africa, Singapore, Thailand, Malaysia and Saudi. We believe that a strong order book, steady margin profile and healthy outlook in T&D segment and emerging segments like Railways/Civil will help KEC deliver 24% earnings CAGR over FY19?21E.


The stock is currently trading at 10.6x/9.2x FY20/FY21E. We maintain “BUY” with revised TP of Rs375 (13x FY21E).

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